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Seventh Circuit Limits Damages Recovery under the VPPA

On March 6, the Court of Appeals for the Seventh Circuit decided an interlocutory appeal in the class action lawsuit Sterk v. Redbox, holding that damages are not available under the Video Privacy Protection Act (VPPA) for violations of subsection (e) of the statute, the “Destruction of Old Records” provision. The court analyzed the statute and concluded that the damages provision only applies to a video tape service provider’s knowing disclosure of a consumer’s personally identifiable information—such as video viewing history—in violation of subsection (b) of the statute. This limitation on the scope of the damages provision is consistent with the approach taken by the Court of Appeals for the Sixth Circuit in a 2004 case.

Enacted in 1988 after Supreme Court nominee Robert Bork’s video viewing history was published in the Washington City Paper during his confirmation hearings, the VPPA places restrictions on video tape service providers’ use, disclosure, and retention of consumers’ personally identifiable information. Subsection (b) of the VPPA prohibits video tape service providers from disclosing personally identifiable information except in certain, limited circumstances, and subsection (e) requires video tape service providers to “destroy personally identifiable information as soon as practicable, but no later than one year from the date the information is no longer necessary for the purpose for which it was collected.” The damages provision in subsection (c) of the VPPA establishes a private right of action which includes liquidated damages in the amount of $2,500 for any act “in violation of this section.”

In Sterk v. Redbox, the class action plaintiffs alleged that Redbox violated the VPPA by maintaining consumers’ credit card information and video viewing history longer than necessary, in violation of subsection (e) of the VPPA. Redbox filed a motion to dismiss, arguing, in pertinent part, that the private right of action established in subsection (c) does not apply to violations of subsection (e). The district court denied Redbox’s motion, holding that the damages provision applies to all subsections of the VPPA, a decision which Redbox appealed to the Seventh Circuit.

The Seventh Circuit engaged in a thorough review of the statutory language, noting that the “statute is not well drafted” due to its failure to specify the scope of the damages provision, and held that the private right of action created by subsection (c) only applies to violations of the disclosure provision in subsection (b). The court relied on two key factors in reaching this decision: (1) the location of the damages provision vis-à-vis the prohibitions in subsections (b), (d), and (e); and (2) the absence of injury in the event that a video tape service provider fails to timely destroy consumers’ personally identifiable information as required by subsection (e).

With regard to the first factor, the court reasoned that since Congress did not place the damages provision at the end of the statute, it intended to limit the provision’s application to the single prohibition that precedes subsection (c)—the prohibition on the disclosure of personally identifiable information. Judge Posner, writing for the court, stated, “[i]f (c) appeared after all the prohibitions, which is to say after (d) and (e) as well as (b), the natural inference would be that any violator of any of the prohibitions could be sued for damages. But instead (c) appears after just the first prohibition, the one in subsection (b), prohibiting disclosure.”

In addition to its analysis regarding the location of the damages provision, the court also noted that no injury would result from a failure to timely destroy consumers’ information in the absence of a corresponding unauthorized disclosure of such information. Thus, there is no need to award damages for the mere unlawful retention of information without a subsequent unauthorized disclosure. To this point Judge Posner stated, “[h]ow could there be injury, unless the information, not having been destroyed, were disclosed? If, though not timely destroyed, it remained secreted in the video service provider’s files until it was destroyed, there would be no injury.” Furthermore, if retention for an unlawful period of time is followed by an unauthorized disclosure, then that would constitute a violation of subsection (b) and the aggrieved consumer would be entitled to damages pursuant to subsection (c).

The Seventh Circuit’s decision is consistent with the Sixth Circuit’s interpretation of the VPPA in Daniel v. Cantrell, wherein the court held that the damages provision of the VPPA only applies to subsection (b). In this 2004 case the Sixth Circuit also relied, in part, on the location of the damages provision in its interpretation of the statute.